Market round-up: 21 – 25 January 2019

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in January 2019.

Blue Monday

First publicised in 2005 as part of a press release, a UK travel company claimed to have calculated the most depressing day of the year. A form of pseudo-science, the formula used, incorporated many factors; the weather, debt levels, the time until the next bank holiday and probability of New Year’s resolutions being broken. Usually falling on the Monday of the last full week of January, Blue Monday as it has been christened, kicked off a week that saw many mainstream markets end in the red as a US governmental shutdown and worries over China’s slowing growth stop a 2019 market rebound in its tracks.

A new order of world power?

China is set to surpass the US as the world’s largest economy by 2030, giving its economic data some added significance. Statistics released on Monday showed that the Chinese economy continues to cool, with GDP growth coming in at 6.4%, down from 6.5% a year ago, and fourth quarter readings at their slowest since the Global Financial Crisis. There were a few bright spots however; Chinese industrial output grew 5.7% in December, beating economists’ expectations of 5.3%.

From a country with a famous Great Wall to one with aspirations of building one, US investors were forced to sit and wait on the side-lines this week as a government shutdown rumbled on to become the longest in American history. Due to arguments primarily over a wall on the border with Mexico, parts of the US government continue to remain closed, causing some to believe that US economic growth for the first quarter of 2019 could be flat if the impasse continues. It has also been estimated that $1.3 billion is shaved off the US economy for each day the partial shutdown continues.

Domestic employment

On domestic shores, the news was much more positive, especially for the consumer, as data showed that the number of people in work has reached the highest on record. Average hourly earnings also increased by 3.3%, outpacing inflation which had previously fallen to 2.1%. The numbers will make for happy reading both in the City and Westminster, especially as the clock ticks down towards the Brexit deadline.

Brexit debate

The tone for the coming months could be set for domestic markets and indeed sterling on Tuesday; parliament is set to debate Theresa May’s proposed next steps, as well as alternative plans put forward by lawmakers, including some which seek to delay the 29 March exit. ‘Plan B’ will also seek to break the parliamentary deadlock over Brexit by proposing concessions from the EU to prevent customs checks on the Irish border, an issue that has proved particularly divisive over the past few months.

Currency

Currency will again be on the agenda during the middle of the week as the US Federal Reserve has a scheduled press conference on Wednesday. Such addresses are the primary tool for the US central bank to communicate with investors their thoughts about monetary policy and the general US economy as a whole. The address will contain the outcome of their vote on interest rates and what their future moves could be. With many investors now expecting a more dovish US Fed, Wednesday’s conference should prove to be fascinating.

Influencing global markets

Equally as important is US employment data, Non-Farm Payrolls. This data is released at the end of the week and is one of the most closely watched pieces of information by investors. Alongside this, we will also be updated on changes in hourly earnings. The data is significant as remuneration levels directly feed into wage inflation and subsequently, rate decisions, all of which will influence global markets.

Any questions?

If you have any questions on anything you’ve read in this blog, your 1825 financial planner would be delighted to help. If you are yet to find a planner and would like to know more about how we can help, please get in touch.